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TITLE 26-INTERNAL REVENUE CODE this section] shall apply with respect to any sale or ex- change after December 31, 1957." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 1245, 1250 of this title. PART VI-EXCHANGES IN OBEDIENCE TO S.E.C. ORDERS Sec. 1081. Nonrecognition of gain or loss on exchanges or distributions in obedience to orders of S.E.C. 1082. Basis for determining gain or loss. 1083. Definitions. § 1081. Nonrecognition of gain or loss on exchanges or distributions in obedience to orders of S.E.C. (a) Exchanges of stock or securities only No gain or loss shall be recognized to the transferor if stock or securities in a corporation which is a registered holding company or a ma- Jority-owned subsidiary company are trans- ferred to such corporation or to an associate company thereof which is a registered holding company or a majority-owned subsidiary com- pany solely in exchange for stock or securities (other than stock or securities which are non- exempt property), and the exchange is made by the transferee corporation in obedience to an order of the Securities and Exchange Commis- sion. (b) Exchanges and sales of property by corporations (1) General rule No gain shall be recognized to a transferor corporation which is a registered holding company or an associate company of a regis- tered holding company, if such corporation, in obedience to an order of the Securities and Exchange Commission, transfers property in exchange for property, and such order recites that such exchange by the transferor corpo- ration is necessary or appropriate to the inte- gration or simplification of the holding com- pany system of which the transferor corpora- tion is a member. Any gain, to the extent that it cannot be applied in reduction of basis under section 1082(a)(2), shall be recognized. (2) Nonexempt property If any such property so received is nonex- empt property, gain shall be recognized unless such nonexempt property or an amount equal to the fair market value of such property at the time of the transfer is, within 24 months of the transfer, under regu- lations prescribed by the Secretary, and in ac- cordance with an order of the Securities and Exchange Commission, expended for proper- ty other than nonexempt property or is in- vested as a contribution to the capital, or as paid-in surplus, of another corporation, and such order recites that such expenditure or investment by the transferor corporation is necessary or appropriate to the integration or simplification of the holding company system of which the transferor corporation is a member. If the fair market value of such non- exempt property at the time of the transfer exceeds the amount expended and the amount invested, as required in the preceding sentence, the gain, if any, to the extent of such excess, shall be recognized. (3) Cancellation or redemption of stock or securi- ties For purposes of this subsection, a distribu- tion in cancellation or redemption (except a distribution having the effect of a dividend) of the whole or a part of the transferor's own stock (not acquired on the transfer) and a payment in complete or partial retirement or cancellation of securities representing indebt- edness of the transferor or a complete or par- tial retirement or cancellation of such securi- ties which is a part of the consideration for the transfer shall be considered an expendi- ture for property other than nonexempt property, and if, on the transfer, a liability of the transferor is assumed, or property of the transferor is transferred subject to a liability, the amount of such liability shall be consid- ered to be an expenditure by the transferor for property other than nonexempt property. (4) Consents This subsection shall not apply unless the transferor corporation consents, at such time and in such manner as the Secretary may by regulations prescribe to the regulations pre- scribed under section 1082(a)(2) in effect at the time of filing its return for the taxable year in which the transfer occurs. (c) Distribution of stock or securities only If there is distributed, in obedience to an order of the Securities and Exchange Commis- sion, to a shareholder in a corporation which is a registered holding company or a majority- owned subsidiary company, stock or securities (other than stock or securities which are non- exempt property), without the surrender by such shareholder of stock or securities in such corporation, no gain to the distributee from the receipt of the stock or securities so distributed shall be recognized. (d) Transfers within system group (1) General rule No gain or loss shall be recognized to a cor- poration which is a member of a system group- (A) if such corporation transfers property to another corporation which is a member of the same system group in exchange for other property, and the exchange by each corporation is made in obedience to an order of the Securities and Exchange Com- mission, or (B) if there is distributed to such corpora- tion as a shareholder in a corporation which is a member of the same system group, property, without the surrender by such shareholder of stock or securities In the corporation making the distribution, and the distribution is made and received in obedience to an order of the Securities and Exchange Commission. If an exchange by or a distribution to a corpo- ration with respect to which no gain or loss is recognized under any of the provisions of this paragraph may also be considered to be within the provisions of subsection (a), (b), or Page 659 § 1081